Zantran Pty Limited v Crown Resorts Limited
[2019] FCA 641
•8 May 2019
FEDERAL COURT OF AUSTRALIA
Zantran Pty Limited v Crown Resorts Limited [2019] FCA 641
File number: VID 1317 of 2017 Judge: MURPHY J Date of judgment: 8 May 2019 Catchwords: PRACTICE AND PROCEDURE – representative proceeding – potential witnesses in proceeding subject to contractual confidentiality obligations – application for orders allowing applicant’s solicitors to confer with potential witnesses – public interest – whether court should decline to enforce confidentiality obligations on the ground that the relevant clauses have a tendency to interfere adversely with the administration of justice – application granted
PRACTICE AND PROCEDURE – where most potential witnesses signed deeds on termination of employment including additional confidentiality obligations – application for suppression or non-publication orders – whether necessary to prevent prejudice to the proper administration of justice under s 37AG – application refused
Legislation: Access to Justice (Civil Litigation Reforms) Amendment Act 2009 (Cth)
Australian Securities and Investments Commission Act 2001 (Cth)
Competition and Consumer Act 2010 (Cth)
Corporations Act 2001 (Cth)
Civil Procedure Act 2005 (NSW)
Civil Procedure Act 2010 (Vic)
Cases cited: A v Hayden (1984) 156 CLR 532; [1984] HCA 67
AG Australia Holdings Ltd v Burton (2002) 58 NSWLR 464; [2002] NSWSC 170
AON Risk Services Australia Ltd v Australian National University (2009) 239 CLR 175; [2009] HCA 27
AS v Minister for Immigration and Border Protection and Others (Ruling No 6) (2016) 53 VR 631; [2016] VSC 774
Australian Competition and Consumer Commission v Cascade Coal Pty Ltd (No 4) [2018] FCA 1243
Australian Competition and Consumer Commission v Valve Corporation (No 5) [2016] FCA 741
Australian Securities and Investments Commission v Richards [2013] FCAFC 89
Axon v Axon (1937) 59 CLR 395
Baltic Shipping Co v Dillon “Mikhail Lermontov” (1991) 22 NSWLR 1
Bianca Hope Rinehart v Georgina Hope Rinehart [2014] FCA 1241
Brand v Monks [2009] NSWSC 1454
Briginshaw v Briginshaw (1938) 60 CLR 336
Cannon v Griffiths & Ors (No 2) [2015] NSWSC 1329
Commonwealth Bank of Australia v Cooke [2000] 1 Qd R 7
Commonwealth v Sanofi (formerly Sanofi-Aventis) [2017] FCA 382
Computer Interchange Pty Ltd v Microsoft Corporation (1999) 88 FCR 438; [1999] FCA 198
Corrs Pavey Whiting and Byrne v Collector of Customs (Vic) (1987) 14 FCR 434
Expense Reduction Analysts Group Pty Ltd v Armstrong Strategic Management and Marketing Pty Ltd (2013) 250 CLR 303; [2013] HCA 46
Gartside v Outram (1856) 26 LJ Ch (NS) 113
Harmony Shipping Co SA v Saudi Europe Line Ltd [1979] 1 WLR 1380
Hogan v Australian Crime Commission (2009) 177 FCR 205; [2009] FCAFC 71
Hogan v Australian Crime Commission (2010) 240 CLR 651; [2010] HCA 21
Initial Services Ltd v Putterill [1968] 1 QB 396
John Fairfax Publications Pty Ltd v District Court (NSW) (2004) 61 NSWLR 344; [2004] NSWCA 324
Johnson v AED Oil Ltd [2011] VSC 94
Jones v Treasury Wine Estates Ltd (2016) 241 FCR 111; [2016] FCAFC 59
Kelly v Willmott Forests Ltd (in liquidation) (No 4) (2016) 335 ALR 439; [2016] FCA 323
Perera v GetSwift Limited (2018) 357 ALR 586; [2018] FCA 732
Richards v Kadian (2005) 64 NSWLR 204; [2005] NSWCA 328
Rush v Nationwide News Pty Ltd (No 6) [2018] FCA 1851
Sydney South West Area Health Service v MD (2009) 260 ALR 702; [2009] NSWCA 343
UBS AG v Tyne [2018] HCA 45
Date of hearing: 12 November 2018 Date of last submissions: 25 January 2019 Registry: Victoria Division: General Division National Practice Area: Commercial and Corporations Sub-area: Corporations and Corporate Insolvency Category: Catchwords Number of paragraphs: 166 Counsel for the Applicant: Ms R Doyle SC and Ms K Burke Solicitor for the Applicant: Maurice Blackburn Lawyers Counsel for the Respondent: Mr N D Hopkins QC, Mr R G Craig and Ms F Shand Solicitor for the Respondent: Minter Ellison ORDERS
VID 1317 of 2017 BETWEEN: ZANTRAN PTY LIMITED
Applicant
AND: CROWN RESORTS LIMITED
Respondent
JUDGE:
MURPHY J
DATE OF ORDER:
8 MAY 2019
THE COURT ORDERS THAT:
1.The persons listed in Appendix “A” are, for the limited purposes of:
(a)conferring with the Applicant’s legal representatives and providing a witness statement or an outline of evidence in this proceeding; and/or
(b)providing to the Applicant’s legal representatives any document produced by the prosecution or the Baoshan District Court in the People’s Republic of China in connection with their criminal prosecution and conviction in China;
relieved of any obligations of confidence owed by them to the Respondent.
2.The Respondent’s application for a suppression or non-publication order under sections 37AF and 37AG of the Federal Court of Australia Act 1976 (Cth) be dismissed. The interim suppression and non-publication order made on 20 November 2018 be vacated.
3.The costs of this application be costs in the cause.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
Appendix “A”
1.Jiang Ling (also known as Jenny Jiang);
2.Yaohui Gaomu (also known as Alfread Gomez);
3.Wang Xun;
4.Liu Yuanzheng (also known as Lucent Liu);
5.Zhu Bing (also known as Jack Zhu);
6.Wu Xuefen (also known as Carol Wu);
7.Tao Yin (also known as Teresa Tao);
8.He Xi (also known as Jessie He);
9.Xiong Bin (also known as Benny Xiong);
10.Dai Bin (also known as David Dai);
11.Jia Qi (also known as Herbert Jia);
12.Pan Dan (also known as Jane Pan);
13.Xuan Peng (also known as Jerry Xuan);
14.Chi Yang (also known as Edison Chi);
15.Cao Zhiqiang (also known as Frank Cao);
16.Liu Xiaolei (also known as Leo Liu);
17.Tang Xiaoquing (also known as Athena Tang); and
18.Cao Xiaoyu (also known as Fiona Cai)
REASONS FOR JUDGMENT
MURPHY J:
INTRODUCTION
This proceeding is a securities class action brought by Zantran Pty Ltd (Zantran) against Crown Resorts Limited (Crown). The proceeding alleges that Crown breached the continuous disclosure regime under ASX listing rules and s 674 of the Corporations Act 2001 (Cth) (Corporations Act) and engaged in misleading or deceptive conduct, but it focusses on an allegation of criminal conduct by employees of a Crown subsidiary working in the People’s Republic of China, engaged in promotional activities directed at recruiting Chinese “high roller” gamblers to gamble at its casinos in Melbourne, Perth and Macau.
It is uncontentious that on 6 February 2015 the Chinese government announced a crackdown on the promotion of overseas gambling to Chinese nationals. The essence of Zantran’s case is that Crown’s promotional activities were illegal under Chinese criminal law, and that at least from that date the employees engaged in such promotional activities were at risk of being arrested and detained, and Crown’s recruitment of Chinese “high roller” gamblers thereby brought to an end. Zantran alleges that the significant revenue Crown received through Chinese “high roller” gamblers was therefore at risk; which risk it says was realised when 18 or 19 employees of a Crown subsidiary (who for convenience I will call Crown employees) engaged in such promotional activities were questioned, arrested and detained by Chinese authorities on 16 October 2016. It is common ground that 19 Crown employees were ultimately charged with criminal offences related to the promotion of gambling and detained. Following the arrest and detention of its employees Crown immediately withdrew from and ceased all such promotional activities in China. The Crown employees ultimately pleaded guilty and were duly convicted in Baoshan District Court in Shanghai, China, and they were later made redundant by Crown.
Zantran alleges that from 6 February 2015 to 16 October 2016 (the relevant period) Crown was “aware” (within the meaning of ASX listing rule 19.12) of this risk to its revenue, and alleges that by failing to disclose that risk Crown breached the continuous disclosure regime in the Corporations Act and engaged in misleading or deceptive conduct. It is uncontroversial that when the fact that the Crown employees had been arrested and detained in China was publicised in the media on 16 October 2016 and announced to the Australian Securities Exchange (ASX) on 17 October 2016, Crown’s share price fell by approximately 13.9%.
Pre-trial preparation is well underway. Discovery is complete or nearly complete. Class member registration and opt out is complete. Pursuant to case management orders made on 30 November 2018 a mediation must be held before 20 June 2019, Zantran must file and serve its lay witness statements by 27 September 2019, and the trial is listed for hearing next year on an estimate of six weeks.
An issue has arisen in the proceeding in relation to whether Zantran’s legal representatives should be permitted to confer with 19 named former Crown employees to obtain witness statements or outlines of evidence and/or to obtain copies of documents connected with their criminal prosecution and conviction. Each of the former Crown employees has entered into an agreement with a Crown subsidiary, of one form or another, which contains express confidentiality obligations. Crown accepts that its former employees can give evidence at the trial but asserts that they cannot confer with Zantran’s legal representatives prior to trial, and that if Zantran wishes to call them to give evidence they must be called “cold”.
By an interlocutory application dated 26 September 2018 Zantran seeks orders that the 19 named former Crown employees be relieved of any obligation of confidence owed by them to Crown for the limited purposes of:
(a)conferring with the Zantran’s legal representatives and providing a witness statement in the proceeding; and/or
(b)providing to Zantran’s legal representatives any document produced by the prosecution or the Baoshan District Court in China in connection with their criminal prosecution and conviction.
Crown opposes the application and argues that its former employees should be held to their express contractual bargains to maintain confidentiality.
For the reasons I explain, and particularly having regard to the obligation of the Court under s 37M of the Federal Court of Australia Act 1976 (Cth) (FCA) to exercise its powers in a way that best promotes the overarching purpose of facilitating the just resolution of disputes according to law and as quickly, inexpensively and efficiently as possible, I am satisfied that in the particular circumstances of the case it is appropriate to make the orders Zantran seeks. There is power to make such orders under ss 21, 23, 37P and 33ZF of the FCA and doing so is consistent with the overarching purpose. There is a public interest in the fair, quick, inexpensive and efficient administration of justice and in my opinion, if the orders are not made, it may have a serious adverse effect on the administration of justice. This outweighs the public interest in maintaining the contractual obligations of confidence between Crown and its former employees, and it is appropriate to decline to enforce those obligations, but only to the extent and for the limited purposes of the orders sought.
THE FACTS
This summary of the relevant facts is drawn from matters which are admitted in the pleadings and from the affidavit evidence filed in the application. I set them out for the purposes of this application only and they should not be taken as factual findings for the substantive proceeding.
The pleadings
Crown is a publicly listed corporation carrying on a business as one of Australia’s largest gaming and entertainment groups, with operations and investments in Australia, Asia, the United Kingdom and the United States. During the relevant period Crown had 100% ownership of the Crown Melbourne casino and hotel resort (Crown Melbourne), and the Crown Perth casino and hotel resort (Crown Perth). Crown also had an equity stake of between approximately 33.6% and 27.4% in Melco Crown Entertainment which owned and operated casinos in Macau and the Philippines.
During the relevant period the customers at Crown Melbourne and Crown Perth included customers who travelled to Australia from other countries, who placed bets in the private gaming rooms of those casinos, were extended credit by Crown to do so including through arrangements known as “rolling chips” with which to gamble, and whom Crown assisted by organising visas and travel plans and providing benefits, including accommodation, meals and refreshments while they were in Australia (Crown’s international VIP gamblers), who I sometimes describe as Chinese “high roller” gamblers.
Crown’s China Operations
Crown’s international VIP gamblers included Chinese nationals from mainland China (Chinese VIP gamblers). It is uncontroversial that in the period between 2014 and October 2016, at least 19 employees of Crown Resort Pte Ltd (Crown Pte) (a Singaporean subsidiary of Crown Australia Pty Ltd which is a subsidiary of Crown Melbourne Limited which is in turn a subsidiary of Crown) variously performed functions and tasks for Crown’s benefit on mainland China. Although they were employed by Crown Pte rather than Crown itself, for convenience I refer to them as “Crown employees”). Zantran alleges that their functions and tasks in China included:
(a)sales, marketing and administrative tasks in teams organised by reference to the regions of China;
(b)meeting with Chinese nationals for the purpose of promoting gambling at Crown Melbourne, Crown Perth and Crown Macau casinos;
(c)providing assistance to Chinese nationals with arranging travel from mainland China to Australia for the purpose of gambling at Crown Melbourne and Crown Perth and providing assistance with visa applications;
(d)organising for Chinese nationals who travelled from mainland China to Australia for the purpose of gambling at Crown Melbourne and Crown Perth to be provided with accommodation, meals and refreshments while in Australia;
(e)organising credit for Chinese nationals to use for gambling at Crown Melbourne, Crown Perth and Crown Macau;
(f)reporting the results of the sales and marketing performed by Crown employees in China; and
(g)contacting Chinese nationals who had engaged in gambling at Crown Melbourne, Crown Perth and Crown Macau casinos for the purpose of requesting those Chinese nationals to pay debts incurred while gambling:
(Crown’s China Operations). Crown essentially admits the functions and tasks engaged in by these employees but says in relation to subparagraphs (b), (c) and (d) that the meetings and assistance were engaged in with respect to either individual or small numbers of Chinese nationals and it does not admit the alleged purposes of gambling or promoting gambling. Crown also admits that from time to time employees of Crown Pte, Crown Melbourne Limited and Crown travelled to China and met with actual or prospective Chinese VIP gamblers.
Zantran alleges that between 2014 and October 2016 persons who performed functions and tasks for Crown on mainland China as part of Crown’s China Operations had sales targets and earned commissions and received payments from Crown based on gambling turnover derived from Crown’s Chinese VIP gamblers. Crown admits that between 2014 and 30 June 2016 it set annual turnover targets by regional market for certain employees engaged in Crown’s China Operations and that they were eligible to earn short-term and/or long-term bonuses.
At all material times Crown Melbourne Ltd employed Jason O’Connor as Group Executive General Manager-VIP International. Crown pleads that he was based in Melbourne and visited mainland China from time to time but irregularly. It says that his duties included visiting China to meet with Chinese nationals who were existing clients of Crown and to develop potential new clients, and approving sales targets for Crown Pte employees working in China.
Crown admits that by October 2016 Crown Pte employed the following 19 named employees to variously undertake some or all of the functions and tasks referred to above, as part of Crown’s China Operations, namely:
(a)Yaohui Gaomu (also known as Alfread Gomez);
(b)Wang Xun;
(c)Liu Yuanzheng (also known as Lucent Liu);
(d)Zhu Bing (also known as Jack Zhu);
(e)Wu Xuefen (also known as Carol Wu);
(f)Tao Yin (also known as Teresa Tao);
(g)He Xi (also known as Jessie He);
(h)Xiong Bin (also known as Benny Xiong);
(i)Dai Bin (also known as David Dai);
(j)Jia Qi (also known as Herbert Jia);
(k)Pan Dan (also known as Jane Pan);
(l)Xuan Peng (also known as Jerry Xuan);
(m)Chi Yang (also known as Edison Chi);
(n)Cao Zhiqiang (also known as Frank Cao);
(o)Liu Xiaolei (also known as Leo Liu);
(p)Jiang Ling (also known as Jenny Jiang);
(q)Tang Xiaoquing (also known as Athena Tang);
(r)Cao Xiaoyu (also known as Fiona Cai); and
(s)Michael Chen:
(collectively, the 19 former Crown employees). Crown says however that two of the employees were not employed by it through the whole of the relevant period.
Crown’s revenue from Chinese VIP gamblers
Zantran alleges that between 2014 and October 2016 Crown derived a substantial portion of its revenue from the implementation of Crown’s China Operations. Crown denies this but admits that 10 to 12% of its total revenue was derived from “VIP program play” by customers from China in each of the three financial years ending 30 June 2014 to 30 June 2016, although it says not all of those customers were Chinese VIP gamblers.
Chinese Law
Zantran’s case focuses on the allegation that Crown’s promotional activities in mainland China directed to Chinese VIP gamblers were directed to recruiting them to gamble in Crown’s casinos in Melbourne, Perth and Macau. It says these promotional activities were illegal under Chinese criminal law. Zantran pleads that at all material times:
(a)Article 303 of the Criminal Law of the People’s Republic of China provided:
Whoever, for the purpose of profit, gathers a crowd to gamble, opens a gambling establishment or undertakes gambling as a business shall be sentenced to fixed-term imprisonment of not more than three years, detention or surveillance and shall be subject to a fine.
(b)Article 25 of the Criminal Law of the People’s Republic of China provided:
A joint crime refers to the situation where two or more persons intentionally commit a crime jointly.
Where two or more persons negligently commit a crime jointly, it will not be punished as a joint crime; those who should bear criminal liability shall be separately punished in accordance with the crime that they have committed.
(c)Article 1 of the “Interpretation of the Supreme People’s Court and Supreme People’s Procuratorate about Some Issues Concerning the Application of Law in Gambling Criminal Cases” (the Supreme People’s Court Interpretation) provided (from 13 May 2015):
Whoever, for the purpose of profit, falls into any of the following circumstances shall constitute ‘gathering a crowd to gamble’ as provided by Article 303 of the Criminal Law:
(1)Organising three or more persons to gamble and reaping profits by taking a percentage in amounts that equal 5,000 yuan or more in aggregate;
(2)Organising three or more persons to gamble where the amount gambled is 50,000 yuan or more in aggregate;
(3)Organising three or more persons to gamble where the number of people participating in the gambling is 20 persons or more in aggregate;
(4)Organising 10 or more persons who are citizens of the People’s Republic of China to go abroad to gamble, from which kickbacks or referral fees are collected.
: (collectively, the Chinese criminal law.)
Crown admits that the relevant Articles can be translated from Chinese into English in the words pleaded, but it otherwise denies the allegation. For the purposes of this application I accept that the Articles are as Zantran pleads.
The announcement on 6 February 2015 of a crackdown on promoting gambling overseas
On 6 February 2015 the Chinese Ministry of Public Security held a press conference and announced a crackdown on casinos which operated in overseas countries and which had set up representative offices in China to attract and recruit Chinese citizens to travel abroad for gambling (the 6 February 2015 Announcement). Crown admits that announcement was generally available and it was widely reported by English language publications including by:
(a)Reuters in an article dated 6 February 2015 titled “China to crackdown on foreign casinos seeking Chinese gamblers”;
(b)the Singapore-based Business Times in an article dated 6 February 2015 from Bloomberg titled “China clamps down on foreign casinos wooing Chinese gamblers”; and
(c)Asia Gaming Brief at agbrief.com in an article dated 9 February 2015 titled “China cracking down on companies luring VIPs”.
Crown admits that it became aware of the 6 February 2015 Announcement on or about 7 February 2015.
The arrest of South Korean casino employees engaged in promoting gambling overseas
On or about 17 June 2015 employees of South Korean casino operators Paradise and Grand Korea Leisure were arrested and detained by Chinese authorities. The arrest of the South Korean employees was reported by:
(a)the Yonhap News Agency on 19 June 2015 in an article titled “China arrests 14 S Koreans for allegedly luring Chinese gamblers”;
(b)the Strait Times on 20 June 2015 in an article titled “S Korean casino operators hit by arrests in China”; and
(c)the Macau Daily Times on 22 June 2015 in an article titled “Korean casinos plunge after report China arrests promoters”.
It is not clear to me whether the Korean casino employees were ultimately charged with any offences, but Crown admits that on and from about 20 June 2015 it became aware that a number of the relevant marketing employees were detained by Chinese authorities.
The arrest, detention and prosecution of Crown staff in October 2016
It is uncontentious that:
(a)on or about 13 and 14 October 2016 Chinese authorities arrested and detained 18 or 19 Crown employees who performed functions on mainland China as part of Crown’s China Operations. Zantran alleges there were 19 persons arrested and detained but Crown says that Fiona Cai was questioned by Chinese authorities at that time but not at that stage arrested. I proceed on the assumption that Crown is correct in relation to Ms Cai;
(b)in June 2017 19 Crown employees (including Ms Cai) were charged with gambling offences contrary to Article 303 of the Chinese criminal law and their cases referred to the People’s Court of Baoshan District in the Shanghai Municipality. It is not clear on the materials whether Ms Cai was detained or not; and
(c)the 19 Crown employees pleaded guilty and on 26 June 2017 they were found guilty of offences contrary to Articles 25 and 303 of the Chinese criminal law by the People’s Court of Baoshan District.
The 17 October 2016 Announcement and share price fall
On Saturday 15 October 2016 and Sunday 16 October 2016 media outlets reported that 19 employees of Crown, including Mr O’Connor and two other Australians, had been detained by Chinese authorities. On 17 October 2016 Crown published a media release to the ASX titled “Response to Media Reports” (17 October 2016 Announcement).
Following the media reports and publication of the ASX announcement Crown’s share price declined from a closing price of $12.95 on Friday, 14 October 2016 to a closing price on Monday, 17 October 2016 of $11.15, that is, by approximately 13.9%.
The allegations as to Crown’s awareness
Zantran alleges that on and from 6 February 2015, being the date of the Chinese government crackdown (or in the alternative on and from 17 June 2015, being the date when South Korean casino employees were detained):
(a)Crown’s China Operations were in breach of the Chinese criminal law (the China Operations Illegal Information); and/or
(b)Crown’s China Operations possessed characteristics which were a target of the Chinese government gambling crackdown announced in the 6 February 2015 Announcement (the China Operations Crackdown Information).
Crown denies that in the relevant period its operations in China were in breach of Chinese law and denies that its operations possessed characteristics which were a target of the Chinese government crackdown.
Zantran pleads that on and from 6 February 2015 (or in the alternative on and from 19 June 2015) there existed a risk that:
(a)Crown employees would be arrested, detained, charged, prosecuted or convicted by Chinese authorities for commission of crimes in contravention of Chinese laws in relation to gambling (Employee Detention Risk);
(b)if that risk came to fruition Crown would be forced to terminate its China operations (China Operations Enforcement Risk);
(c)if Crown terminated its China operations it would suffer a significant reduction in the revenue gained from Chinese VIP gamblers (Chinese VIP Revenue Risk); and
(d)if there was a significant reduction in the revenue achieved from Chinese VIP gamblers, Crown would suffer a significant reduction in its total revenue (Revenue Risk).
Crown denies that any such risks existed.
Zantran pleads that on and from 6 February 2015 (or in the alternative 19 June 2015) Crown was aware (within the meaning of the ASX Listing Rule 19.12) of the China Operations Illegal Information, China Operations Crackdown Information, Employee Detention Risk, China Operations Enforcement Risk, Chinese VIP Revenue Risk and the Revenue Risk. Crown denies that such risks existed and denies that it was aware of such risks within the meaning of ASX Listing Rule 19.12.
The allegations of breach of the continuous disclosure regime and misleading conduct
Zantran pleads that on and from 6 February 2015 (or in the alternative on and from 19 June 2015):
(a)the China Operations Illegal Information, China Operations Crackdown Information, Employee Detention Risk, China Operations Enforcement Risk, Chinese VIP Revenue Risk and the Revenue Risk was information that a reasonable person would expect to have a material effect on the price or value of Crown shares within the meaning of ASX Listing Rule 3.1 and s 674(2)(c)(ii) of the Corporations Act, and was not generally available;
(b)Crown was therefore obliged to immediately tell the ASX of the alleged information and alleged risks;
(c)Crown did not tell the ASX at any stage during the relevant period;
(d)the ASX did not become aware of that information and those risks until Crown’s 17 October 2016 Announcement; and
(e)Crown thereby contravened s 674(2).
Crown admits it did not inform the ASX of the alleged information or alleged risks during the relevant period, but says that the Chinese criminal law including an English translation was generally available, that the alleged information and alleged risks were not in existence during the relevant period and that the 17 October 2016 Announcement did not disclose that information or those risks. It denies any breach of s 674.
Zantran also alleges that Crown represented to investors and potential investors in Crown shares that:
(a)it had in place effective policies, systems and structures to identify, assess, monitor and manage risk to Crown and that it was able to and did effectively identify and manage such risks (Risk Management Representation); and
(b)Crown had marketed itself as a luxury brand to Chinese VIP gamblers and had experienced strong growth in associated revenue, it would continue to so market itself, and it would in the future continue to attract an even greater share of Chinese VIP gamblers and its Chinese VIP revenue would continue to grow (Chinese Market Growth Representation).
It alleges that by making those representations Crown engaged in misleading or deceptive conduct in breach of s 1041H the Corporations Act, s 12DA(1) of the Australian Securities and Investments Commission Act 2001 (Cth) and s 18 of the Australian Consumer Law in Schedule 2 of the Competition and Consumer Act 2010 (Cth).
Crown denies that it made the representations alleged and it denies that it engaged in misleading or deceptive conduct or conduct which was likely to mislead or deceive.
The affidavit evidence
Zantran relies on four affidavits by Mr Andrew Watson, a principal at Maurice Blackburn Lawyers, the solicitors for Zantran, made 26 September 2018, 30 October 2018, 9 November 2018 and 18 January 2019 (respectively the First, Second, Third and Fourth Watson Affidavits). Crown relies on an affidavit by Mr Glen Ward, a partner at Minter Ellison, the solicitors for Crown, made 7 November 2018. Neither Mr Watson nor Mr Ward were cross examined.
The application for a suppression or non-publication order
Crown seeks a suppression or non-publication order for a period of five years from the date of the orders, subject to any further order of the Court, that the following information be marked “confidential” on the electronic Court file and its contents not be accessed by anyone other than the parties and not be published by any person:
(a)paragraphs 14, 15 and 17 of Mr Ward’s affidavit;
(b)paragraph 13 of Crown’s submissions dated 7 November 2018; and
(c)paragraph 6 of Crown’s submissions dated 21 November 2018.
Each of the relevant paragraphs sets out a confidentiality term in the Finalisation Deeds signed by each of the former Crown employees except for Ms Jiang (and Mr Chen who instead signed a Separation Deed).
Crown submits, and I accept, that there is a public interest in holding parties to their contractual bargains, including contractual obligations to maintain confidentiality. It contends, and I accept, that this public interest is relevant to the Court’s determination of whether to make the suppression or non-publication order sought. Crown argues that, having regard to the express obligations of confidence contained in the Finalisation Deeds, entered into by persons who are not parties to the proceedings, the Court should make the suppression or non-publication orders it seeks. It describes the orders sought as being of limited scope and duration and as appropriate and necessary to prevent prejudice to the proper administration of justice.
I do not accept Crown’s submissions. In my view its submissions fell well short of establishing a proper basis for the suppression or non-publication orders it seeks.
I commence by noting that:
(a)section 37AF of the FCA provides that the Court may make a suppression or non-publication order only “on grounds permitted by this Part”;
(b)section 37AG sets out the available grounds. Crown relies solely on s 37AG(1)(a), being that such an order “is necessary to prevent prejudice to the proper administration of justice” (emphasis added); and
(c)section 37AE provides that in deciding whether to make a suppression or non-publication order the Court “must take into account that a primary objective of the administration of justice is to safeguard the public interest in open justice.” While this requirement does not inevitably lead to the rejection of non-publication or suppression orders, the Court is obliged by s 37AE to treat the public interest in open justice as a primary consideration: Australian Competition and Consumer Commission v Cascade Coal Pty Ltd (No 4) [2018] FCA 1243 at [44] (Foster J). Section 37AE reflects the well-recognised importance of open justice, described as “one of the most fundamental aspects of the system of justice in Australia”: John Fairfax Publications Pty Ltd v District Court (NSW) (2004) 61 NSWLR 344; [2004] NSWCA 324 at [18] (Spigelman CJ).
First, it is important to understand the information in respect of which Crown seeks the suppression or non-publication order. Crown seeks orders to suppress publication of the fact that it has entered into Finalisation Deeds with former employees who (except for Mr Chen who was not charged) pleaded guilty to and have been convicted of criminal activities in connection with the promotion of gambling, in which activities it is open to infer they participated for Crown’s benefit and on Crown’s behalf. Under the deeds the employees are bound not to reveal the terms of the agreement, the discussions or negotiations leading to the agreement, or to disclose any ‘story’ or narrative concerning any aspect of the “Circumstances”, which includes their criminal prosecution. In my view it would be contrary to the public interest to suppress such information.
Second, Crown bears the onus of establishing the basis for the suppression or non-publication order it seeks, yet it did not produce the Finalisation Deeds at the heart of its application, even on a confidential basis. The Court is left in the position of being unable to reach a fully informed view about the nature of those agreements or their extent. I am left to construe the confidentiality terms set out in Mr Ward’s affidavit and in Crown’s submissions without the benefit of seeing the context in which those clauses appear in the entirety of the Finalisation Deed. For example, the deed provides that the former employee shall not disclose, cause or permit the publication of any ‘story’ or narrative concerning any aspect of the “Circumstances” to any person, whether directly or indirectly, without obtaining Crown Pte’s prior consent. Mr Ward states that the term “Circumstances” is defined to include, at a minimum, each of the former employees’ employment with Crown Pte as well as the criminal proceedings before the Baoshan District Court but he did not extract the definition of “Circumstances” or attach the deed itself.
Third, the onus on a party seeking to persuade the Court to make an order to restrict publication of evidence is “a very heavy one”: Computer Interchange Pty Ltd v Microsoft Corporation (1999) 88 FCR 438; [1999] FCA 198 at [16] (Madgwick J). In Hogan v Australian Crime Commission (2010) 240 CLR 651; [2010] HCA 21 (Hogan) at [38]-[39], the High Court approved the following statement by Jessup J in Hogan v Australian Crime Commission (2009) 177 FCR 205; [2009] FCAFC 71 at [42]:
…the question will always be: is an order necessary to prevent prejudice to the administration of justice? Absent an affirmative answer to this question it is, in my view, almost meaningless to propose that documents themselves are, or that the information in them is, inherently confidential to an extent justifying, or assisting in the justification of, the making of an order permanently protecting them from public view.
His Honour’s remarks were made in relation to the s 50 of the FCA as it then stood, but they apply equally to s 37AF read with s 37AG(1)(a).
The use of the word “necessary” in s 37AG(1)(a) denotes a reasonably strict test; necessary is a “strong word”: Hogan at [30]. The High Court distinguished the test of “necessity” from less demanding standards such as whether a suppression or non-publication order would be “convenient, reasonable or sensible”: Hogan at [31]. To establish that a suppression or non-publication order is necessary to prevent prejudice to the administration of justice requires Crown must show more than that it is desirable that an order be made: Australian Competition and Consumer Commission v Valve Corporation (No 5) [2016] FCA 741 at [8] (Edelman J). Embarrassment or reputational damage is not enough to justify a suppression order, as such results are the price of open justice: Bianca Hope Rinehart v Georgina Hope Rinehart [2014] FCA 1241 at [28] (Jacobson J). Crown did not come close to establishing that the orders it seeks are “necessary” to prevent prejudice to the proper administration of justice.
Fourth, while there is a public interest in holding parties to their contractual bargains, including as to confidentiality (Baltic Shipping Co v Dillon “Mikhail Lermontov” (1991) 22 NSWLR 1 at 9 (Gleeson CJ); Cannon v Griffiths & Ors (No 2) [2015] NSWSC 1329 (Cannon) at [14] (Beech-Jones J)) that is not determinative of whether is appropriate to make a suppression or non-publication order. As Beech-Jones J said in Cannon (at [13]) the fact that the parties have agreed to confidentiality:
…does not advance the argument for a suppression order very far. If the Court were to refuse to make such an order in this case it would not mean that either party had failed to honour their contractual obligations or that the Court sanctioned them doing so. Instead the public interest in open justice would have simply required that their dispute be litigated publicly despite their wishes to the contrary.
Fifth, Crown contends that it is significant that the former Crown employees who entered into the Finalisation Deeds are not parties to the litigation. In my view that provides little support for Crown’s application when it did not seek to explain by evidence or submissions how the interests of the former Crown employees could be harmed by publication of either the fact that they entered into a Finalisation Deed or the fact that it contains a confidentiality clause.
The application for a suppression or non-publication order is refused.
Contact by Ms Jiang (through Mr Sikkema)
Mr Watson has the care and conduct of the proceeding on behalf of Zantran together with Mr Michael Donnelly, a senior associate at Maurice Blackburn. In the First Watson Affidavit Mr Watson states that he is informed by Mr Donnelly and believes that:
(a)on 31 August 2017 Mr Donnelly was told by another Maurice Blackburn employee that Mr Sikkema, the husband of Ms Jenny Jiang (one of the 19 former Crown employees), had telephoned Maurice Blackburn and said he was seeking legal representation for a class action on behalf of Ms Jiang and the other Crown employees who had been detained in China. Mr Sikkema said that Ms Jiang and the other former Crown employees would be willing to give evidence in the (then) proposed securities class action against Crown;
(b)Mr Donnelly telephoned Mr Sikkema on 1 September 2017 and informed him that discussing anything with him, his wife or any of the other former Crown employees would “create issues of confidentiality and conflict of interest due to the possible presence of confidentiality clauses in any employment contract or any possible non-disclosure agreements.” Mr Sikkema told Mr Donnelly that there was a confidentiality clause in Ms Jiang’s employment contract but said it did not cover information that had been made public, and described how in his view much of the information had been made public. Mr Donnelly told Mr Sikkema that he would consider how best to approach the situation;
(c)Mr Donnelly then telephoned Mr Sikkema on 6 September 2017 and informed him that Maurice Blackburn had decided it could not speak to or act for Ms Jiang and the other Crown employees, but it could refer him and the other employees to another law firm. Later that day Mr Donnelly emailed Mr Sikkema the contact details of Sam Eichenbaum, a partner at Rigby Cooke Lawyers.
In the Second Watson Affidavit Mr Watson states that the next contact Mr Donnelly had with Mr Sikkema was when he received an unsolicited email from Mr Sikkema on 4 October 2018. Mr Donnelly responded by email to Mr Sikkema on 26 October 2018, in the following terms:
Dear Jeff,
Thanks for your patience in waiting for our response to your email.
As we discussed during our conversation last year, we understand that your wife and other former Crown employees have signed confidentiality agreements and/or have obligations of confidence to Crown through their contracts of employment. If we were to speak to your wife under the current circumstances, we may be at risk of it being said that we caused your wife to breach those confidentiality provisions, and legal action could possibly be taken against her and our firm by Crown.
However, we have recently filed an application in our proceeding seeking a Court order that would relieve your wife, and other former Crown employees, of their obligations of confidence to Crown, to the extent necessary to allow our firm to confer with them. We expect a hearing for our application in November 2018.
Following the Court’s determination of our application, I’ll be in touch to let you know the outcome.
Kind regards,
Michael
The 19 former Crown employees
It should be understood that the 19 former Crown employees who are the subject of the application are not entirely coextensive with the Crown employees convicted of criminal offences. Mr O’Connor was convicted but is not a subject of the application, and Mr Chen is named in the application but he was not convicted. The materials do not make it clear but I presume Zantran included Mr Chen in the application because, as President of International Marketing of Crown Pte, it is likely he directed the impugned promotional activities by Crown.
The employment contracts
With the exception of two junior employees (Ms Tang and Ms Cai) each of the 19 former Crown employees were employed under a written employment contract.
Crown discovered copies of the signed employment contracts of 17 of the former Crown employees, but those which relate to Ms Pan and Mr Cao were photocopied incorrectly and are incomplete. The unsigned copies of Ms Pan’s and Mr Cao’s employment contracts however show that they include the same confidentiality terms as the other contracts. I proceed on the basis that each of the 19 former employees, except for Ms Tang and Ms Cai (and Mr Chen who had a different contract) is bound by an express contractual confidentiality obligation, in clause 12 of their employment contracts, as follows:
12Confidential information
You must not, without the prior written consent of [Crown Pte], either during your employment with [Crown Pte] or at any time after the termination of it:
(a)divulge to any person other than any member of the Crown Limited group of companies (Group), or their respective officers and employees; or
(b)use for your own benefit or the benefit of any person other than any member of the Group,
any confidential information about [Crown Pte] or any Group Company or their respective businesses or affairs acquired during your employment. Confidential information about [Crown Pte] or the Group or their respective businesses includes but is not limited to trade secrets, confidential knowledge or any [proprietary] information, any written or oral information in any form (including electronic and copies) of a commercial, operational, technical or financial nature which is not publicly available and specifically all information relating to existing or future corporate opportunities, research, financial and sales data, pricing and trading terms, margins and costs, evaluations, opinions, interpretations, acquisition prospects, the identity of customers and suppliers, their activities and their requirements, the identity of key client contacts, marketing and merchandising techniques, prospective names and marks.
For the purposes of this clause, confidential information shall not include any information:
(a)which has become publicly known through no wrongful act by you or any third party;
(b)which you have developed independently, as evidenced by appropriate documentation; and/or
(c)which you are required to disclose by law or judicial process, provided that you shall notify [Crown Pte] immediately of the same so as to provide or afford [Crown Pte] the opportunity to obtain such protecting orders or other relief as the compelling court or other entity may grant and shall use your best efforts to assist [Crown Pte] in seeking such protecting orders or other relief.
Crown also sought to rely on cl 17(e) of the employments contract which contains further restrictions on disclosure. However, in my view that clause is not relevant, relating as it does to “Restraint of Competitive Activities” and to disclosure of “trade secrets and industrial processes”. I cannot see how allowing Crown’s former employees to make a witness statement to lawyers for use only in a court proceeding falls within the ambit of this clause. For completeness however I set it out below:
17 Restraint of Competitive Activities
…
(e)You agree and acknowledge that:
(i)you will in the course of your employment obtain information concerning the business and finances of the Group and its related entities including trade secrets and industrial processes;
(ii)disclosure of such information to other parties could materially harm the Group;
(iii)the restrictive covenants contained in this clause are reasonable and necessary for the protection of the confidential information and goodwill of the Group;
(iv)the remedy of damages for any breach of the obligations of this Agreement may be inadequate to protect the interests of the Group and that the Group is entitled to seek and obtain equitable relief, including temporary and permanent injunction, or any other remedy, against you in any court without the necessity of proof of actual damages suffered by the Group;
(v)in view of the restraints contained in this clause for the protection for the proprietary interests of the Group, this clause will survive the termination of your employment with [Crown Pte] in all circumstances including repudiation of [Crown Pte] of this Agreement; and
(vi)the restrictions are separate, distinct and several so that the unenforceability of any restriction does not affect the enforceability of the other restrictions.
Mr Chen’s employment contract contains the following confidentiality term at clause 14:
14Confidential Information
Without limiting any obligations under a deed poll executed in accordance with clause 19, you must not, without the prior written consent of [Crown Pte], either during your employment with [Crown Pte] or at any time after the termination of it, other than in furtherance of your employment pursuant to this Agreement:
(a)divulge to any person other than [Crown Pte], its related entities or its employees; or
(b)use for your own benefit or the benefit of any person other than the Group,
any confidential information about the Group or any of its businesses or their affairs acquired during your employment which is not publicly available. Confidential information about the Group or any of its businesses includes but is not limited to any written or oral information in any form (including electronic) of a commercial, operational, technical or financial nature which is not publicly available and specifically all information relating to corporate opportunities, research, financial and sales data, pricing and trading evaluations, opinions, interpretations, acquisition prospects, the identity of customers, their activities and their requirements, the identity of key client contacts, market merchandising techniques, prospective names and marks.
His contract also contains a separately executed deed poll as a schedule, which has an express confidentiality obligation in clause 2, as follows:
2Confidential information
2.1During and after the Executive’s employment, the Executive will not divulge, use (or attempt to use) or appropriate for the Executive’s own use or for the use of others, except as [Crown Pte] may authorise or direct in writing, any Confidential Information obtained by the Executive during the Executive’s employment.
2.2In the event of an inadvertent disclosure of Confidential Information by the Executive, he will immediately notify [Crown Pte].
2.3The Executive will take all reasonable steps to prevent and protect the unauthorised use or disclosure of Confidential Information. The Executive will not copy or reproduce, or remove from the premises of any of the Beneficiaries, any document in any form, including but not limited to electronic form, which contains Confidential Information, without [Crown Pte]’s written consent.
2.4In this Deed Poll, Confidential Information means all information of the Beneficiaries that is of a confidential nature (whether or not marked as being ‘confidential’), and that has not been publicly disclosed, and specifically includes:
(a) inventions and discoveries (whether or not patentable);
(b) client and customer lists;
(c) trade secrets;
(d) financial information; and
(e) scientific, technical, produce and service information.
Crown ceases operations in China
Following the arrest and detention of the Crown employees in October 2016 Crown withdrew from and ceased all of the operations of its VIP International team on the ground in China. Crown says that each of the 19 Crown employees were subsequently made redundant but one, Ms Pan, subsequently accepted employment with Crown Perth.
The employees enter into Finalisation Deeds and the Separation Deed
In 2017 and 2018 each of the former Crown employees, except for Ms Jiang, entered into a further agreement with Crown Pte. Mr Chen did so in the form of a Separation Deed and the other 17 did so in the form of a Finalisation Deed.
The confidentiality terms of the Separation Deed
Mr Ward deposes that the Separation Deed between Crown Pte and Mr Chen contains the following confidentiality terms:
1 Definitions
Confidential information means all of the information of [Crown Pte] or of any Group member including, but not limited to, information relating to any written or oral information in any form (including electronic) of a commercial, operational, technical or financial nature which is not publicly available and specifically all information relating to corporate opportunities, research, financial and sales data, pricing and trading terms, valuations, opinions, interpretations, the [identity] of customers, their activities and their requirements, the identity of key client contacts, marketing and merchandising techniques, prospective names and marks.
Group means:
(a) [Crown Pte] and its officers, employees or agents;
(b)any Related Body Corporate of [Crown Pte] and its and their officers, employees and agents;
(c)an entity that controls, or is controlled by or is under common control with, [Crown Pte];
(d) any other entity that is connected with [Crown Pte]; and
(e)any company which is not a Related Body Corporate of [Crown Pte] but in which [Crown Pte] (or one of [Crown Pte]’s related bodies corporate) owns at least 20% of the issued share capital.
…
4.1If asked to do so by any member of the Group, Mr Chen must provide reasonable support and assistance to any member of the Group in relation to:
(a)any matter concerning, relating to or arising out of the lead-up to and the detention of employees of [Crown Pte] in China in October 2016;
(b)any claims or litigation or regulatory inquiries or actions arising from the matters referred to in clause 4.1(a) above,
at times and in a manner that does not unreasonably interfere with Mr Chen’s other employment or business commitments.
8 Confidentiality
8.1 Mr Chen must not disclose to any person or body:
(a) the terms of this deed;
(b)the content of any discussions that led to or related to any matter raised or reflected in this deed; and
(c)any details of or information concerning or relating to the matters referred to in clause 4.1, except:
(d)to the extent that the law requires or to obtain confidential accounting or legal advice;
(e) by express prior written agreement from [Crown Pte]; or
(f) to enforce this deed or any of its terms.
8.2Mr Chen acknowledges his obligation not to use or disclose any of the Confidential Information, and undertakes to comply with those obligations for so long as that information is not in the public domain (other than through a breach by Mr Chen of this obligation of confidence).
The confidentiality terms of the Finalisation Deeds
Mr Ward deposes that the Finalisation Deeds contain the following confidentiality terms:
1 Definitions
Group means:
(i)Crown Resorts Limited of Level 3, Crown Towers, 8 Whiteman Street, Southbank, Victoria, Australia (Crown Resorts) and its officers, employees and agents;
(ii)Crown and its officers, employees and agents;
(iii)any Related Body Corporate of Crown or Crown Resorts and their officers, employees and agents; and
(iv)any company which is not a Related Body Corporate of Crown or Crown Resorts, but in which Crown or Crown Resorts (or one of their Related Bodies Corporate) owns at least 20% of the issued share capital.
4 Obligations of confidentiality
(a)Each party must keep absolutely confidential the terms of this Deed and the discussions and negotiation of the terms of this Deed, except:
(i) as required by law;
(ii) with the express consent of the other party;
(iii) for the purpose of obtaining confidential accounting or legal advice;
(iv) for the purpose of enforcing this Deed; or
(v)in the case of Crown, for Group reporting or disclosure purposes (including reporting within the Group or disclosure to a regulator of gaming or other operations of any member of the Group).
(b)Without limiting the generality of clause 4(a), the Employee agrees not to disclose or cause or permit the publication of:
(i) any of the terms of this Deed;
(ii) any discussions or negotiations leading to this Deed;
(iii)any non-public information about any member of the Group or its and their business;
(iv) any non-public information about the Employment; or
(v)any ‘story’ or narrative concerning any aspect of the Circumstances, to any person, whether directly or indirectly and, in particular and without limiting matters, to any journalist, writer or media organisation (including press, radio, television or online) or by use of any social media network such as Facebook, MySpace, Twitter, Instagram, LinkedIn, Pinterest, Google Plus+, Tumblr, VK, Flickr, Vine, Snapchat, Tinder or any blogs (whether personal or otherwise), without obtaining the prior written consent of Crown.
The Mintz Group Report
The Third Watson Affidavit refers to a report by the Mintz Group (Mintz Group Report) dated 25 March 2015 and discovered by Crown on 18 October 2018. The Mintz Group Report is the report of investigation conducted by that organisation at the request of Crown. The report states (at page 1) that its purpose is to summarise:
…the results of our inquiries into the ongoing corruption investigations in Macau, pursuant to your request and at your direction to assist you in assessing the risk to your company personnel in Mainland China.
(Emphasis added.)
Under the heading “Risk Assessment” the report states (at 7):
There is clearly enhanced attention underway from relevant PRC authorities concerning foreign casino marketing activities in mainland China. The motivation for this effort is likely manifold, to include certainly aspects of the current anti-corruption campaign, as well as likely rent-seeking opportunity on the part of China to redistribute the pie in the coming reauthorization of business licenses. On this latter point, there is strong recognition that foreign firms have made tremendous profits from their Macau licenses and an effort could very well be underway to address this issue for greater local benefit, particularly concerning who ultimately ends up receiving license renewals as well as profit-sharing obligations. The coming months likely will feature an increasing level of scrutiny by PSB, and possibly other, authorities directed at foreign casino marketing and other personnel in the mainland, though it’s likely to be uneven in its application by authorities similar to other areas of investigatory concern.
Under the heading “Operational Recommendations” the report states (at 7):
Communications: It would be well advised to avoid cell phone and text message communications dealing with marketing efforts to the degree possible, and limit overall use while in country. Not unlike normal business conditions in China, but with the recognition that your industry is now under a greater microscope, each person should assume that all communications are either being actively monitored, or very well could be gathered later (digital email/texts/posts) should a specific investigation ensue. It is for this reason that a phone call is better than a digital message, simply for the reason that it usually requires live monitoring to be productive for an investigation should one occur.
(Emphasis added.)
Zantran submits that the advice provided to Crown that its employees should avoid digital communications is a likely explanation for what it says is the paucity of discovered documents relating to the activities of the 19 former Crown employees.
The progress of discovery
Mr Watson and Mr Ward both deal with the progress of discovery, doing so in the context of Mr Watson’s contention that Crown has discovered few documents in relation to the nature of the activities in China of the 19 former Crown employees, and only one document in relation to their criminal prosecution. This is advanced to buttress Zantran’s argument that, in order to be able to properly progress its case and to narrow the areas of dispute, it is necessary that Ms Jiang and any other former Crown employee who agrees to do so be allowed to confer with Maurice Blackburn so as to provide a witness statement and/or produce documents relating to their criminal prosecution. I note at this point that the asserted deficiencies in discovery are far from central to my conclusion on the application, but to the extent they play a part I set out my view below.
On 26 April 2018 the Court made orders for an initial tranche of documents (Stage 1 discovery), which included employment records relating to the former employees and “charge sheet, pleas, judgment and any other official documents produced by the prosecution or Baoshan District Court in connection with the prosecution and conviction of the detained employees” (China Prosecution Documents). Stage 1 discovery was completed on 3 July 2018.
It is common ground that as at the hearing of the application Crown had produced only one document responsive to the China Prosecution Documents category, being a document written in Simplified Chinese and entitled “Pleading”, which sets out profiles of the detained Crown employees, an outline of the laws are alleged to have been contravened and an overview of Crown’s assets and revenue. Mr Watson states that in a telephone conference on 13 July 2018 between Mr Donnelly and Catherine Macrae of Minter Ellison, Ms Macrae said that Crown had discovered all documents it had in this category and that because Crown was not a defendant to the prosecution in China it was not sent documents by the Chinese authorities. In a letter dated 24 July 2018 Minter Ellison stated:
We are instructed that Crown does not have any other documents in its possession that might fall within the scope of this category, save for some limited email correspondence between our client and its China based solicitors, which correspondence is entirely privileged.
On 27 June 2018 the Court made further orders for discovery by Crown including for a post-detention snapshot of the mailboxes of the 19 former Crown employees (Stage 2 discovery). Crown produced a first tranche of Stage 2 discovery on 1 October 2018, another tranche of Stage 2 discovery on 18 October 2018 and it anticipated that Stage 2 discovery would be complete by about 16 November 2018. Mr Ward states that Crown has produced email correspondence sent and received by the former Crown employees, documents concerning Crown’s operations in mainland China during the relevant period, documents concerning the conduct of and functions performed by the former employees in mainland China at relevant times and documents relevant to the knowledge of Crown employees, including but not limited to the 19 former Crown employees, at relevant times. Mr Ward further states that he expects that a substantial number of additional relevant documents of the same nature, or which are otherwise relevant to its China Operations, would be identified and produced in the final tranche of Stage 2 discovery (after the hearing).
I have no reason to doubt the accuracy of Mr Ward’s evidence but it does not deal with the question as to the probative value of the documents produced. I accept Mr Watson’s evidence that up to the date of the hearing the majority of the documents discovered by Crown in Stage 2 discovery are “daily scorecards” (being documents which appear to record and report the gambling turnover and theoretical contribution from Chinese VIP gamblers, broken down into Crown’s regional teams and compared against monthly, quarterly and yearly targets) or covering emails which are attached to a daily scorecard. I also accept his evidence that upon Maurice Blackburn’s review of the completed Stage 2 discovery, Crown has discovered relatively few documents which deal with the activities of the 19 former Crown employees in China, once the following types of documents are accounted for: (a) daily scorecards and the covering emails; (b) duplicated documents; (c) non-relevant system files; (d) cash books (being Excel files of work expenses for which an employee is seeking reimbursement from Crown) or covering emails regarding cash books; and (e) documents that are the daily results for VIP gaming at Crown Melbourne or Crown Perth. Mr Watson says and I accept that Crown has produced only one document in the China Prosecution Documents category. In respect of documents authored by Ms Jiang, Crown has discovered 534 documents but once non-relevant system files, cash books and covering emails, and other disparate documents of limited relevance are accounted for, Crown has discovered a relatively limited number of documents in this category.
Crown has produced two documents which foreshadowed conference calls proposed to be held to discuss Chinese government statements about the promotion of overseas gambling, being:
(a)a conference call on 13 March 2015 addressed to the VIP International Sales team regarding “Discussion of Recent Chinese Government Statements about Promotion of Overseas Gambling”; and
(b)a conference call on 20 October 2015 addressed to, amongst others, all of the relevant former Crown employees who were employed at the time, regarding “Recent crackdowns in China against the Korean casinos”.
Crown has not however discovered any notes, minutes or records of those conference calls.
It seems likely that the VIP International Sales team who attended the first conference call would have included many of the former Crown employees. The list of persons who attended the second conference call includes most of the former Crown employees (aside from Lucent Liu, Jessie He, Frank Cao and Leo Liu, each of whom was not employed by Crown at that time, and Athena Tang). I accept Mr Watson’s evidence that the matters discussed at the two foreshadowed telephone conferences may be probative evidence about Crown’s knowledge in 2015 of the legality of its China Operations and therefore be highly relevant to the facts in issue in the proceeding.
THE APPLICATION
Zantran alleges that Crown failed to inform the ASX that its China Operations were being conducted in a manner which involved the commission of offences under Chinese criminal law. The former Crown employees (except for Mr Chen) have pleaded guilty to the commission of those offences. Crown denies that during the relevant period its China Operations were in breach of Chinese criminal law or possessed characteristics which were a target of the Chinese government crackdown, and it denies that it was aware of this information for the purpose of the ASX Listing Rule.
Zantran’s lawyers wish to confer with the 19 former Crown employees because it says they are likely to be able to provide valuable information about matters relevant to the proceeding, including by explaining the apparent tension between the guilty pleas and Crown’s denials in its defence. Mr Watson expects that they will be in possession of information about Crown’s China Operations and documents related to their prosecution and conviction. If the former Crown employees are willing to do so, and if the information they provide is valuable, Zantran may wish to obtain witness statements from them. Mr Watson also says that access to such information will assist Zantran to narrow the issues in dispute in the proceeding, reduce costs, truncate potential interlocutory disputation and significantly streamline any trial of the matter.
But as previously set out each of the former Crown employees have entered into an agreement with Crown Pte which contains express confidentiality obligations. All of them, except for two junior employees, have a written employment contract with confidentiality terms. Zantran accepts that those confidentiality terms are capable of being construed as preventing them from conferring with its legal representatives, if that involves describing or explaining the nature of the work they performed when employed by Crown. In particular it accepts that they are prohibited from disclosing “information…of a commercial nature…which is not publicly available” or matters such as “the identity of customers and suppliers, their activities and their requirements, the identity of key client contacts, marketing and merchandising techniques.”
Subsequently Mr Chen entered into the Separation Deed and the other former Crown employees (except for Ms Jiang) entered into a Finalisation Deed. Neither Zantran nor the Court have been provided those deeds but Zantran accepts that, on the face of the confidentiality terms, they are considerably broader than the scope of the confidentiality obligations under the employment contracts.
Zantran seeks orders to relieve the former Crown employees of any contractual confidentiality obligations for the limited purposes of their providing witness statements in the proceeding and/or providing documents relevant to their criminal prosecutions and convictions. Crown opposes the relief sought in the application on the basis that it is entitled to enforce the contractual obligations of confidence it is owed.
THE RELEVANT AUTHORITIES
The principal relevant authorities are A v Hayden (1984) 156 CLR 532; [1984] HCA 67 (Hayden); AG Australia Holdings Ltd v Burton (2002) 58 NSWLR 464; [2002] NSWSC 170 (AG Australia) (Campbell J); Richards v Kadian (2005) 64 NSWLR 204; [2005] NSWCA 328 (Kadian) (Beazley JA, with whom Hodgson JA and Stein AJA agreed); Johnson v AED Oil Ltd [2011] VSC 94 (Johnson) (Sifris J); AS v Minister for Immigration and Border Protection and Others (Ruling No 6) (2016) 53 VR 631; [2016] VSC 774 (J Forrest J); and Commonwealth v Sanofi (formerly Sanofi-Aventis) [2017] FCA 382 (Sanofi) (Nicholas J).
The rule derived from the English decisions in Gartside v Outram (1856) 26 LJ Ch (NS) 113 and Initial Services Ltd v Putterill [1968] 1 QB 396 that there is no confidence as to the disclosure of iniquity is not directly relevant in the circumstances of this case. That rule was articulated in the context of an implied obligation of faith in an employment contract and it does not directly apply where there is an express obligation of confidentiality. Where, as in the present case, the applicant asserts a contractual right, the law of contract sufficiently deals with the situation: Corrs Pavey Whiting and Byrne v Collector of Customs (Vic) (1987) 14 FCR 434 (Corrs Pavey) at 452-453, 455-456 (Gummow J); Brand v Monks [2009] NSWSC 1454 at [243] (Ward J).
I now turn to address the relevant authorities.
Hayden
In Hayden 11 plaintiffs who had participated in a security training exercise arranged by the Australian Secret Intelligence Service sought injunctions to restrain the Commonwealth from disclosing their identities to the Chief Commissioner of Police. The exercise, to free a “hostage” from a hotel room, went astray, and it was alleged that the plaintiffs had committed criminal offences. The terms of the contracts of employment of all but one of the plaintiffs provided that their identities and any act done in the course of training or work would be kept confidential. The High Court held that this provision in their contract of employment was contrary to public policy (Gibbs CJ dissenting on this issue at 543-4).
Mason J said (at 553) that the confidentiality term was void:
…because the promise seeks to impose an obligation which is at variance with a fundamental head of public policy – the public interest in the enforcement of the criminal law and in the administration of justice.
His Honour held (at 556-7) that:
…subject to minor qualification only, Lord Lyndhurst was correct in Egerton v. Brownlow when he said that any contract having a tendency, however slight, to affect the administration of justice is illegal. He was of course speaking of a contract or engagement which has a tendency to affect the administration of justice adversely…
Sometimes it is said that a contract to which the principle applies is void; at other times it is said that the contract is unenforceable or…that the court will not lend its aid to the enforcement of the contract. The true position, as I see it, is that some contracts are void whereas others are valid, though the court will decline to enforce the particular provision in a valid contract in particular circumstances when enforcement of that provision would have an adverse effect on the administration of justice. Thus, a simple agreement not to disclose the existence of a serious criminal offence, which has been, or is about to be, committed in consideration of the payment of a sum of money may well be void because it is illegal. However, it will be otherwise with a contract which is in all respects lawful but nevertheless contains a provision which, if enforced according to its terms, will result in an interference with the administration of justice.
(Emphasis added.)
His Honour also said (at 559):
The refusal of the courts to enforce contracts on grounds of public policy is a striking illustration of the subordination of private right to public interest. The problem is one of formulating with any degree of precision the criteria or the circumstances which will justify a court in refusing to enforce a contract on the ground that there is a countervailing public interest amounting to public policy. The difficulties in ascertaining the existence and strength of an identifiable public interest to which the courts should give effect by refusing to enforce a contract are so formidable as to require that they “should use extreme reserve in holding such a contract to be void as against public policy, and only do so when the contract is incontestably and on any view inimical to the public interest”, to use the words of Asquith L.J. in Monkland v. Jack Barclay Ld. Here, however, the head of public policy invoked is well recognized and it relates to the enforcement of the criminal law – a field in which the courts have a special interest and experience.
(Emphasis added, citations omitted.)
Wilson and Dawson JJ observed (at 571):
Interference with the administration of justice has long been recognized as a head of public policy to which the courts will have regard when asked to enforce a contract. In Collins v. Blantern, Wilmot L.C.J. said of a contract to stifle a prosecution for perjury:
This is a contract to tempt a man to transgress the law, to do that which is injurious to the community: it is void by the common law; and the reason why the common law says such contracts are void, is for the public good. You shall not stipulate for iniquity. All writers upon our law agree in this, no polluted hand shall touch the pure fountains of justice.
Their Honours further said (at 573-4) that:
…there is a public interest in the enforcement of contractual rights which must be overborne by a greater public interest before injunctive relief should be denied. …
[I]f the Court was to grant the plaintiffs the permanent injunctions which they seek it would be elevating their private right to confidentiality above the interest of the community in the efficient investigation of alleged breaches of the law. The Commonwealth seeks to advance that interest, yet the injunctions would prevent it from doing so. The administration of justice, and in particular the enforcement of the criminal law, must always rank highly in any assessment of the public interest.
Brennan J held (at 587) that:
A term of a contract not to disclose confidential information though disclosure is reasonably so required to be made and though disclosure is in the public interest is void.
AG Australia
The circumstances in AG Australia are similar to those in the present case. The question was whether it was contrary to public policy for an employer to seek to enforce a confidentiality clause in an employment contract so as to prevent an employee from disclosing its confidential information to a solicitor in relation to pending court proceedings. The issue arose in the context of a securities class action brought against AG Australia Holdings (formerly GIO Insurance) in which a former senior executive of GIO, Mr Burton, was interviewed by the solicitors for the applicant, Maurice Blackburn, so as to make a witness statement. It was intended to call Mr Burton to give evidence at the trial.
AG Australia became aware that Mr Burton had been talking to the solicitors for the applicant and that the firm was preparing a witness statement. Based on confidentiality terms in Mr Burton’s employment contract AG Australia sought injunctive relief against Mr Burton and Maurice Blackburn to prevent Mr Burton from having further discussions with the firm and to restrain the firm’s use of the information already obtained. Mr Burton and Maurice Blackburn opposed enforcement of Mr Burton’s confidentiality obligations on the basis that pre-trial preparation was well underway and the conduct of the trial would be seriously prejudiced if the injunctions were granted: AG Australia at [62]. Campbell J rejected that argument.
Mr Burton and Maurice Blackburn relied on Hayden to argue that enforcement of the confidentiality clause would interfere with the administration of justice. Campbell J analysed the decision in Hayden and considered (at [81]) that Mason J’s judgment had “a continuing flavour of focusing on contracts which interfere with the due administration of the criminal law”. At [83]-[85] his Honour referred to the comments of Wilson and Dawson JJ, Brennan J and Deane J, all of whom also focused on public interest in the administration of the criminal law. Campbell J concluded (at [86]) that the ratio in Hayden was that the relevant confidentiality term was void because it interfered with the administration of the criminal law. Given there was no allegation in AG Australia of any interference with the administration of the criminal law, Campbell J concluded that if the confidentiality clause was to be struck down or not enforced on the grounds of public policy, some source other than the ratio of Hayden must be found for that statement of public policy.
Following an analysis of the relevant authorities Campbell J concluded that enforcement of Mr Burton’s contract would not contravene public policy. His Honour said (at [170]-[172]):
Having surveyed these principles which the community has already adopted formally by law, I can see no basis for holding that a former employee, who has been entrusted with his employer’s confidential information, and has promised not to disclose it, ought be free on grounds of public policy to disclose that information to a solicitor, if he so wishes, and if the solicitor bona fide wishes to receive that information for the purpose of advancing litigation which the solicitor is in the course of running.
In Re Morris, Jordan CJ said that the court could also look at principles which the community as a whole has already adopted tacitly by the general course of corporate life. No specific evidence on that matter was put before me. As a matter of judicial notice, I do not find that there is any definite principle which this community adopts in the general course of its corporate life, whereby former employees are free to disclose their former employer’s secrets to a solicitor who wishes to use those secrets in litigation against the former employer.
In these circumstances, I do not find that public policy requires the terms of the confidentiality undertaking to be treated as void, or for the court to decline to enforce them, to the extent that the confidentiality undertaking prohibits Mr Burton from disclosing confidential information to [the solicitors for the applicant].
Richards v Kadian
In this case Ankur Kadian, an infant who sued through a litigation guardian, brought a claim in negligence against Mr Richards, the medical practitioner who had treated his congenital heart condition. Dr Richard’s legal representatives sought to interview two of Ankur’s treating doctors as part of pre-trial preparation and Ankur objected on the basis that it was a breach of doctor/patient confidentiality. Beazley JA (with whom Hodgson JA and Stein AJA agreed) analysed the relevant authorities and concluded that Ankur was entitled to insist upon the obligation of confidence owed by his treating doctors. Her Honour said (at [84]-[87]):
…The real question for determination is when the court will not permit an obligation of confidence to be insisted upon. As appears from the above review of authorities, the principle has always been stated in association with an identifiable public interest that goes beyond the private civil rights of parties to the obligation. …
The principle that there is no property in a witness does not assist. That principle is designed to ensure that relevant evidence can be brought before the court. A party cannot constrain a witness from giving evidence regardless of the relationship between the party and the witness, except to the extent that the law so provides…That does not mean, however, that the right of a party to call evidence in court operates so as to permit or require a potential witness to breach an obligation of confidence other than in the giving of evidence. Put simply, it does not mean that in the pre-trial phase, a party wishing to call a witness bound by an obligation of confidence, can require the witness to provide information that will breach the obligation of confidence.
This case involves private litigation between the parties. The opponents have engaged the legal system in seeking redress for an alleged wrong. They have a right to do so. The claimant has a right to defend the allegations against him. To that extent, the administration of justice is involved. Ankur also has a confidential relationship with his treating doctors that the law will protect unless it can be said that to do so may interfere with the administration of justice. However, the language of the case law is clear: an obligation of confidence will only be overcome where there is some matter of public interest that requires it. That will only be so where, to use the language of Asquith LJ in Monkland v. Jack Barclay Ltd, “the contract is incontestably and on any view inimical to the public interest”. Party/party litigation of the type involved here is not of that nature.
I would also reject the claimant’s argument that there is no balancing exercise involved in determining whether an obligation of confidence can be insisted upon in circumstances where there is an interference with the administration of justice. There may be a balancing exercise, depending upon the nature of the confidential information, the public interest said to be affected and whether there is any other public interest consideration. This too is clear on the authorities. However, in this case, that question does not arise, as, contrary to Senior Counsel’s submission, the obligation of confidence is not being insisted upon in circumstances where it is contrary to public policy to do so.
Johnson
In Johnson, the AED Group brought substantial proceedings against numerous parties including the Equinox parties, and then settled with the Equinox parties under a settlement deed which included a clause in which the Equinox parties warranted that they would “not act against the interests of [the AED parties] save as compelled by a court”. The continuing defendant, Minter Ellison, subpoenaed two Equinox parties to give evidence and those parties applied for a declaration that the clause precluding them from acting against the interests of the AED parties did not prevent them from communicating and conferring with Minter Ellison’s legal representatives in relation to the evidence that they proposed to give so that they would not be called to give evidence at the trial cold.
Their evidence may be highly probative in relation to Zantran’s allegations that during the relevant period Crown knew or ought to have known that the promotional activities in which its employees were engaged were in breach of Chinese criminal law or had characteristics which were a target of the Chinese government crackdown, and that there existed a material risk that it would be forced to stop recruiting Chinese VIP gamblers to gamble at its casinos overseas. Their evidence may also be relevant to the “event study” experts’ evidence as to the timing and extent of any risk and therefore upon their estimates of any inflation in the share price through non-disclosure at different points in the relevant period.
I accept Crown’s contention that there is no evidence that enforcement of the contractual confidentiality obligations of the former Crown employees will prevent any of them from giving evidence, nor any evidence that it will prevent Zantran from pursuing its claims, but that is not the end of the issue. If Zantran’s legal representatives are not permitted to confer with the former Crown employees prior to trial Zantran must call them cold. It will not know what their evidence is until it is disclosed for the first time at trial, and it will not be able to provide it to the expert witnesses it has engaged. To the extent that their evidence turns out to be adverse to Zantran’s case it will not have been forewarned about it or given an opportunity to investigate it. Although Crown is likely to know more than Zantran about its former employees’ promotional activities and their knowledge of any risk to Crown’s business, to the extent that their evidence runs contrary to Crown’s defence it may also not have been properly forewarned about it.
In my view allowing Ms Jiang and other former Crown employees to give evidence cold will almost inevitably result in applications to adjourn or delay the trial by one or both of the parties while they seek instructions regarding the matters disclosed for the first time at trial. There is a real prospect, if not a likelihood, that one or both of the parties will apply to adjourn the trial to enable it to: (a) call further evidence; (b) search for documents to amplify, rebut or qualify their evidence; or (c) to put the new matters disclosed to their expert witnesses to allow them to take that evidence into account in providing their opinions: see AS at [39].
In civil litigation there is a fundamental requirement that the opposing party be given a reasonable opportunity to understand the case that it is required to face, which requirement lies behind numerous decisions in relation to pleadings, particulars and pre-trial provision of evidence in chief. In the present case Zantran’s solicitors are in the unusual position that they consider that the former Crown employees are likely to be able to give probative evidence, they suspect that the evidence will be helpful to Zantran’s case, but they are not in a position to even provide an outline of anticipated evidence to Crown. If the witnesses give evidence they must do so cold, which in my view is akin to allowing “trial by ambush”, although (unusually) both parties may suffer from any such ambush. As Allsop P (as his Honour then was) said in Sydney South West Area Health Service v MD (2009) 260 ALR 702; [2009] NSWCA 343 at [53]:
…the Court of Appeal has on a number of occasions since 2001 made clear that the ambush theory of litigation is dead in this state. The same thing has been said in the Federal Court: see in particular Nowlan v Marson Transport Pty Ltd (2001) 53 NSWLR 116; 34 MVR 495; [2001] NSWCA 346 (Nowlan); Baulderstone Hornibrook Engineering Pty Ltd v Gordian Runoff Ltd [2008] NSWCA 243 (Baulderstone); and Ingot Capital Investments Pty Ltd v Macquarie Equity Capital Markets Ltd (2008) 252 ALR 659; 68 ACSR 595; [2008] NSWCA 206.
Whether it will ultimately be appropriate to grant an adjournment is unknown but in my view there is a realistic prospect that it will be. If an adjournment is granted it is likely to be for a substantial period because of the difficulties in accommodating a six week trial around other listings. Such an adjournment is likely to cause a significant delay in the hearing of the case and serious wastage of both the Court’s and the parties’ resources.
This stands in contrast to what will occur if orders are made to permit Zantran’s legal representatives to confer with those of the former Crown employees who wish to do so, for the limited purposes of preparing a witness statement for use in the proceeding and/or providing documents produced by the prosecution or the Baoshan District Court in connection with their prosecution and conviction. The provision of witness statements will mean that Zantran’s legal representatives will be able to prepare its case with a proper appreciation of the evidence, Crown will have been forewarned about and had a proper opportunity to investigate this evidence, and the parties’ expert witnesses will have been able to take their evidence into account in reaching their opinions. It is manifestly in the interests of justice that the evidence be marshalled in an orderly way and without disruption to the trial: see AS at [41].
Further, if it eventuates that the former Crown employees (or some of them) cannot provide probative evidence then I expect that Zantran’s legal representatives will not prepare witness statements, they will not be called as witnesses, and the potential for an adjournment will have been avoided.
Fourth, the importance of pre-trial provision of witness statements is not restricted to the conduct of the trial; it also extends to “facilitating an early resolution of the case”: see [11.1], Central Practice Note: National Court Framework and Case Management (CPN-1). It is axiomatic that settlement of large and complex litigation is more readily achievable when the parties are informed about the strengths and weaknesses of their respective cases. The importance of pre-trial disclosure of evidence is also amplified by the numerous obstacles to settlement which exist in class action litigation, which are not present in other types of litigation: see [9.2] Class Actions Practice Note (GPN-CA). I consider that the prospects of settlement of the present case are likely to be enhanced by pre-trial provision of any witness statements provided by Ms Jiang and other former Crown employees.
Fifth, the nature of the case is also relevant in deciding where the public interest lies. Zantran is just a Crown shareholder. It cannot be expected to know much about the promotional activities on mainland China in which the former Crown employees engaged directed at recruiting “high roller” gamblers to gamble in Crown’s casinos in Melbourne, Perth and Macau. Nor can it be expected to know much about whether Crown knew during the relevant period that its promotional activities were in breach of Chinese criminal law and/or possessed characteristics which were a target of the Chinese government gambling crackdown. Mr Watson says, and I accept, that discovery has yielded little probative information in that regard. It would be open to infer from the Mintz Group Report (but unnecessary to decide at this point) that the low level of documents discovered reflects, at least in part, advice Crown received to minimise digital communications so as to avoid running afoul of the Chinese government crackdown. The provision of detailed evidence by the former Crown employees regarding their promotional activities (including in relation to the matters described at [135] above) may be highly probative and is likely to assist the Court in deciding whether Zantran can establish the allegations it has made: see AS at [40].
Sixth, it is also relevant that the present case is a class action: see AS at [41]; cf AG Australia. I say this because the orders for the exchange of lay witness evidence before provision of expert reports and before trial have a particular significance given the Court’s supervisory and protective role in relation to class members’ interests: Treasury Wine at [38]-[39]. The proceeding is an ‘open’ class action and the evidence is that, as at 3 September 2018, the ordinary Crown shares on issue were held by 54,605 shareholders. While the number of class members is unknown, any findings will bind many more persons or entities than just the parties. The fact that the evidence of the former Crown employees may be highly probative of central issues in the case and that findings made by the Court on the common factual and legal issues will bind a large number of non-parties is important to my view.
The fact that the case is a class action is also relevant in another way. History teaches that settlement is the most likely outcome in the case (see Perera v GetSwift Limited (2018) 357 ALR 586; [2018] FCA 732 at [30] (Lee J)) and I note that Zantran acts in a representative capacity. It owes fiduciary obligations to class members and its legal representatives have fiduciary obligations to class members, or at least have duties to act in their interests: see Kelly v Willmott Forests Ltd (in liquidation) (No 4) (2016) 335 ALR 439; [2016] FCA 323 (Murphy J) at [220] and the cases there cited. Before Zantran’s legal representatives may recommend a settlement they must be satisfied that the settlement is fair and reasonable having regard to the interests of class members who will be bound by it: Australian Securities and Investments Commission v Richards [2013] FCAFC 89 at [7]-[8] (Jacobson, Middleton and Gordon JJ).
In the confidential counsel’s opinion provided to the Court as part of any settlement approval application under s 33V, counsel will be required to prognosticate on, amongst other things, the risks of establishing liability and the range of reasonableness of the settlement in light of all the attendant risks of the litigation: see paragraph 14.4 Class Actions Practice Note. That will necessarily involve counsel reaching a view as to the evidence that can be adduced on behalf of the applicant, assessing the likely value of that evidence to the applicant, and prognosticating as to whether the Court is likely to feel an actual persuasion or reasonable satisfaction of the occurrence or existence of the fact which the evidence is directed at proving: Briginshaw v Briginshaw (1938) 60 CLR 336 at 361-2 (Dixon J); Axon v Axon (1937) 59 CLR 395 at 403 (Dixon J).
Zantran’s legal representatives will only be able to give proper consideration to the likelihood of the Court feeling an actual persuasion or reasonable satisfaction of the truth of the evidence they anticipate the former Crown employees will give when they are in a position not only to know its scope, but have a basis for assessing the likelihood that their evidence will be credible and accepted by the Court. Unless they are permitted to confer with the former Crown employees it is hard to see how they can do so, and how they can reach the requisite satisfaction that any proposed settlement is fair and reasonable in the interests of class members. At the least, it is likely to be substantially more difficult for them to reach such satisfaction.
The power under s 33ZF is “the widest possible power that extends to all procedures appropriate or necessary to deal with the matter on a just basis”: Westpac Banking Corporation v Lenthall [2019] FCAFC 34 at [86] (Allsop CJ, Middleton and Robertson JJ). Having regard to the representative nature of the case, and the likely effect of declining to make the orders on the interests of numerous class members, I consider that the orders Zantran seeks are appropriate or necessary to ensure that justice is done in the proceeding, pursuant to s 33ZF.
Seventh, contrary to Crown’s submissions I consider it plain that the necessary “public element”, transcending the private rights of the parties, can be seen in the circumstances the present case. That public element is found in facilitating the just resolution of the dispute between Zantran and Crown according to law and as quickly, inexpensively and efficiently as possible: see AS at [42]. The High Court in Aon recognised that the timely and cost-effective resolution of a dispute affects not only the parties to the dispute but also the courts and other litigants. With the introduction of s 37M in 2009 Parliament recognised the public element in the fair, expeditious and efficient management of a proceeding in this Court; it provided that the Court must exercise its powers in the way that best promotes the just determination of all proceedings before the Court, the efficient disposal of the Court’s overall caseload, and the disposal of all proceedings in a timely matter.
As I have said, if the orders sought are not made there is a realistic prospect that the trial may be adjourned, part heard, from its present hearing date. If that occurs other litigants will have been denied an earlier hearing date because a six week trial period is set aside to hear the present case. It is unlikely that other cases can be readily slotted in at late notice to fill that period. Although the remarks were made in different contexts, in Aon at [93] and UBS AG at [45] the High Court pointed to the undesirability of adjournments which may delay the proceedings of other litigants. To similar effect Wigney J said in Rush v Nationwide News Pty Ltd (No 6) [2018] FCA 1851 at [125]:
It also cannot be forgotten that, each time a trial date is vacated, or adjourned part-heard because of an amendment to the pleadings, the hopes or expectations of other litigants for an early trial date will be frustrated. Equally, the public’s confidence in the administration of justice and the efficient use of judicial resources is also undermined by delays caused by amendments and other interlocutory disputes.
Further, an adjournment of the trial, part heard, will not just cause delay; it is likely also to cause some inefficiency or waste in Court and/or judicial resources. It is almost inevitable that there will some inefficiency and wastage for the Court if the trial is adjourned part heard, including that I will again be required prepare for trial, read into the case, and read any revised experts’ reports.
Eighth, the necessary balancing exercise includes weighing up what information is sought to be protected, whether the rights of third parties are affected, and whether there are any wider public policies involved: Kadian at [42]. In this case the relevant third parties are the former Crown employees. In my view their interests will not be adversely affected by making the orders Zantran seeks. The proposed orders provide for a voluntary process and any of the former Crown employees who do not wish to make a witness statement will not be affected.
In terms of the competing public interest, I accept that there is a public interest in upholding contractual bargains, including as to confidence. But in my view, in the circumstances I have described, that interest is outweighed by the public interest in the just resolution of disputes according to law and as quickly, inexpensively and efficiently as possible. In this regard it is relevant that Crown does not argue that it will suffer any commercial disadvantage in the sense of disclosure of trade secrets or confidential information that could be used by a competitor if the proposed orders are made, and relevant that Crown no longer engages in the same promotional activities in China. Relieving the employees of their confidentiality obligations for the limited purpose of providing a witness statement and/or documents regarding their criminal prosecution and conviction will involve the minimum necessary interference with the employees’ obligations of confidence.
It is pertinent too that the former Crown employees are not prevented by the confidentiality terms from giving evidence at the trial, and there is no question that at that point they can be compelled to disclose any relevant confidential information.
Ninth, I can see little merit in Crown’s contention that the proposed orders are inappropriate because there is a risk that its former employees may reveal privileged information to Zantran’s legal representatives. I expect the experienced solicitors and counsel representing Zantran will take appropriate steps to ensure any potential witnesses limit their discussions to matters they know from their own experience and do not divulge any matters relating to legal advice. Further, the submission invites speculation when there is no evidence of the employees receiving any legal advice or Crown passing on any legal advice that it had obtained. If the employees obtained their own legal advice, the privilege would ordinarily be theirs to waive.
On the basis of the above grounds I consider the orders Zantran seeks should be made.
There is however an additional matter which confirms that conclusion. One of the considerations to be taken into account in the balancing exercise is the information which is sought to be protected: Kadian at [42]. In the present case that is information concerning the promotional activities in China of Crown’s former employees, which it is open to infer they engaged in for Crown’s benefit and on Crown’s behalf. The former employees (except for Mr Chen who was not charged) pleaded guilty to criminal charges concerning their promotional activities and they were duly found guilty. If the orders sought are not made the former Crown employees will be prevented from making a witness statement in an Australian legal proceeding which may disclose their (admitted) criminal conduct, and may disclose that Crown knew or ought to have known that such conduct was in breach of Chinese criminal law. Such information should not be protected from disclosure, at least for the limited purpose and in the limited way the orders contemplate.
Finally, turning briefly to the relevant authorities, I accept that the view I have reached differs from the conclusions reached in AG Australia and Kadian, but each case turns upon its particular facts and circumstances. There are in my opinion some important differences between the present proceeding and the circumstances in AG Australia and Kadian:
(a)most importantly, those decisions were made at a different time and in a different statutory context, before the decision in Aon and before enactment of s 37M which introduced the requirement that the Court must exercise its powers in the way that best promotes the overarching purpose. As I have said, the requirement under s 37M is significant to my conclusion as to where the public interest lies;
(b)in the present case the former Crown employees (except for Mr Chen) have pleaded guilty to and been convicted of criminal behaviour. This is in contrast to the circumstances in AG Australia, where the court did not consider the relevant conduct had been demonstrated even at a prima facie level (at [203]), and noted that a “mere allegation” that such conduct has been committed is insufficient to prove its existence (at [200]);
(c)the present case is fixed for hearing and case management orders have been made which require Zantran to file its lay evidence. That was not the position in AG Australia or Kadian;
(d)in Kadian the contractual obligation of confidence existed in the context of a doctor/patient relationship; one of the most jealously guarded relationships of confidence: at [86]. While in Kadian the information sought to be protected was of the most private kind (relating as it did to the plaintiff’s medical condition), the information sought to be protected in the present case is of a very different kind; and
(e)unlike the position in Kadian which involved private litigation between the parties the present case is a class action and the findings made by the Court on the common factual and legal issues will bind a large number of class members and extend beyond the private civil rights of the parties: AS at [41]; cf AG Australia which was also a class action.
The decision in Johnson was made in even more different circumstances, including: (a) the late timing of the application (at [20]); (b) the Equinox parties received substantial benefit from entering into a settlement deed and then sought to avoid the prohibition on assisting the AED parties (at [30]); and (c) Sifris J expressly held that even if the prohibition on assisting the AED parties was not waived the Equinox parties would still be able to adequately and sufficiently defend the contribution proceedings and give evidence with minimal disruption to the conduct of the trial (at [49]). This decision can readily be distinguished.
Although I accept that it has relevant differences, I consider the decision in AS is made in a similar factual and legislative context, and I have reached a similar conclusion to that case. I accept Crown’s contention that the present case is distinguishable from Sanofi but the fact remains that Nicholas J recognised that there is a public interest in allowing the legal representatives of parties to meet with and interview witnesses of fact before they are required to give evidence at trial (at [80]). His Honour concluded (at [82]) that the clause of the agreement in which the Apotex parties agreed not to voluntarily assist the Commonwealth in its litigation was contrary to the public interest because of its strong propensity to prevent or hinder the Commonwealth’s legal representatives’ efforts to interview the Apotex witnesses and discuss with them matters relevant to the issues in this proceeding prior to them giving their evidence.
THE POSITIONS OF THE DIFFERENT FORMER CROWN EMPLOYEES
To this point I have not expressly addressed the different positions of the former Crown employees but, as Zantran submits, there are some differences between the position of Ms Jiang and that of the other employees. I am satisfied on the evidence that she is willing, perhaps even keen, to give evidence about her involvement in those promotional activities. The evidence in relation to the preparedness of other former Crown employees to do so is weaker, although sufficient for the application. Further, and importantly, unlike the other former Crown employees Ms Jiang did not enter into a Finalisation Deed or a Separation Deed, both of which contain broader confidentiality obligations than the employment contracts. In my view Zantran’s application is strongest insofar as it relates to Ms Jiang.
Neither party submits that there are differences of significance in the positions of the other former Crown employees, but in my view there is a difference between the position of Mr Chen and that of the other former Crown employees. He was not charged with or convicted of criminal offences in China relating to the promotion of gambling, and he has made no admission (by pleading guilty) as to being involved in illegal promotional activities. Mr Chen was a relatively senior employee of Crown, and he entered into the Separation Deed which specifically enjoins him from disclosing any details of or information concerning, relating to or arising out of the lead-up to and the detention of employees of the Crown employees in China in October 2016. On balance, I am not prepared to make the orders Zantran seeks in relation to Mr Chen. While that should not be taken to mean that such orders will never be appropriate, it would require Zantran to adduce, amongst other things, better evidence as to his involvement in the promotional activities that were found to be illegal and better evidence as to his preparedness to be a witness in the proceeding.
In relation to the former Crown employees other than Ms Jiang and Mr Chen, Crown’s opposition to the application is partly based on the contention that there is no recent compelling evidence that any of them would be willing to give evidence on behalf of Zantran. In circumstances where Mr Sikkema apparently did not provide a basis for his statement that they are prepared to give evidence, that submission is not entirely without force. I have given consideration to:
(a)making a direction (to the extent necessary) to allow Zantran’s legal representatives to contact each such former employee (other than Ms Jiang and Mr Chen) to ascertain whether he or she is willing to give evidence, but not to make orders to facilitate their making a witness statement at that point; and
(b)upon Zantran’s legal representatives filing an affidavit stating that they had been expressly advised that the former employee was willing to give evidence, making the orders Zantran seeks for each such person.
In the finish I have not taken that course. Having regard to the view I have reached on the merits of the application, I consider the quicker, less expensive and more efficient course is to make the orders Zantran seeks. The process is no less fair because it is entirely voluntary and those former Crown employees that do not wish to confer with Zantran’s legal representatives may decline to do so. The orders will have no impact in relation to those former employees who do not wish to make a witness statement.
CONCLUSION
For these reasons I consider the orders should be made. In my view, except in relation to Mr Chen, allowing enforcement of the former Crown employees’ contractual obligations of confidence is likely to have a seriously adverse effect on the administration of justice. In the circumstances of the case the public interest in the just resolution of disputes according to law and as quickly, inexpensively and efficiently as possible outweighs the public interest in maintaining the former employees’ obligations of confidence.
I have made orders accordingly.
I certify that the preceding one hundred and sixty-six (166) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Murphy. Associate:
Dated: 8 May 2019
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